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Unclaimed Property Focus
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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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Understanding the priority rules

Posted By Administration, Thursday, April 7, 2016

When property is abandoned, the law requires the holder to transfer it to the state, which then acts as its custodian. While this fundamental concept of unclaimed property is relatively easy to understand, the reality of which jurisdiction is the rightful custodian of the property is much more complicated. Is it the state where the transaction took place, the state where the owner is believed to be located, the state where the holder is incorporated, or the state where the holder’s primary business location resides?

 

During the Understanding the Priority Rules session at UPPO’s Annual Conference in March, presenters Kevin Spiegel, senior manager from Crowe Horwath LLP, and David Finkelson, partner with McGuireWoods LLP, discussed the priority rules that specify how to determine the appropriate state to receive unclaimed property.

 

The Rules

The U.S. Supreme Court established two unclaimed property priority rules with its Texas v. New Jersey decision in 1965:

  • First Priority Rule: Abandoned property must be escheated to the state of the owner’s last known address, as determined by the holder’s books and records.
  • Second Priority Rule: The property is paid to the state of corporate domicile if the owner’s address is incomplete or unknown, or if the owner’s last known address is in a state that does not provide for escheat of the property owed.

 

“The court reasoned that this approach is very straightforward, is easy to resolve, and leaves no legal issues to be decided,” Spiegel says.

 

Specific Property Types

Two additional Supreme Court cases further clarified the rules for money orders and similar payment instruments, and for securities. Following a 1972 decision in Pennsylvania v. New York, a case dealing with money orders, Congress established an exception to the priority rules for money orders, traveler’s checks and similar written payment instruments other than third-party bank checks. In these cases, the value of the property escheats to the state where the money order or traveler’s check was purchased. If that information is not available, it escheats to the state where the holder’s primary place of business is located.

 

In the 1993 case of Delaware v. New York, the Supreme Court considered which state receives unclaimed securities distributions held by intermediary banks, brokers and depositories for owners who cannot be identified or located. It ruled that the intermediary—not the issuer—is considered the holder because it is legally obligated to deliver securities to the owner. Thus, under the second priority rule, the intermediary’s state of corporate domicile receives the unclaimed property.

 

Corporate Domicile

Because application of the second priority rule is dependent on the holder’s “corporate domicile,” knowing what that term means is essential. As with so many aspects of unclaimed property law, it depends. Many states’ unclaimed property statutes rely on the definition of “domicile” from the 1981 or 1995 Uniform Unclaimed Property Act. For a corporation, “domicile” is the state of incorporation. For unincorporated holders, it is the principal place of business. Other states, however, define “domicile” for unincorporated business associations as the state of organization or formation, rather than the principal place of business. And some states fail to define “domicile” entirely. Resolving those conflicting definitions presents a quandary for holders.

 

Delaware, where many companies were legally formed, takes the position that its unclaimed property statutes cover Delaware-formed unincorporated entities. Some holders, however, have argued against Delaware that the state of their primary location—rather than Delaware, where they were established—is entitled to receive funds under the second priority rule.

 

The judge in a recent Delaware Chancery Court case agreed, ruling that Delaware has jurisdiction and its escheat laws apply to Delaware-formed LLCs even though their principal locations are elsewhere.

 

“This is by no means the last word on the issue,” Finkelson says. “Ultimately, it will likely take a case where the state of principal location is at the table, advocating for its position as opposed to just the holder doing so.”

 

Although the domicile issue presents some room for conflict, the priority rules have provided a largely reliable method for holders to determine the proper states for escheating unclaimed property. As such, understanding and applying the rules correctly is essential. 

 

“Whether it’s in our daily reporting, in an audit setting or in a mergers and acquisitions setting, application of the priority rules is one of those issues that’s always looming in all aspects of what we do,” says Finkelson.

 

Tags:  compliance  priority rules  unclaimed property 

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Michigan Treasurer Khouri shares why S.B. 538 will impact the business community

Posted By Administration, Thursday, March 31, 2016

Claps were coming from Michigan as Michigan S.B. 538 passed through the Michigan legislative chambers and was signed into law in December 2015. It’s progressive legislation that contradicts the current enforcement environment in many states, and will positively impact the business community.

 

As Treasurer Khouri stepped into office, his team developed a list of projects to improve efficiency and effectiveness. Onto the list went unclaimed property compliance and enforcement and owner reunification efforts. “One of the main focuses in Treasury is to improve the operational efficiency of Treasury, and unclaimed property was on the list. It [audits] took too long and focused on the wrong thing, and we needed to improve the process for those that enforced the audits and those that needed to respond to audits and escheat property,” says Treasurer Khouri.

 

To get the project moving, the Treasury Department reached out to the business community to better understand the issue and identify solutions that worked. Jon Hallack, a UPPO member, joined the work group assembled by the treasurer on behalf of his employer, Stryker Corp. “Treasurer Khouri came to a meeting of the Michigan Chamber of Commerce Tax Policy Committee and listened to suggestions of improvement Treasury could make. As a result of his willingness to listen, and then act, SB 538 came to be,” says Hallack.

 

“We knew audits took too long, and in affect were collecting less money,” says Khouri. The legislation aimed to shorten the audit period, define the property types involved in audits, and created a tangible timeline for holders and the state to follow.

 

Highlights of the bill

  • Streamlines audit process:

o   To participate in the streamlined audit process the holder must execute a nondisclosure agreement acceptable to the Treasurer within 30 days

o   Goal to complete the audit within 18 months

  • Defines an eligible holder that can participate in the streamlined audit process
  • Exempts property valued $25 or less from being reported to Michigan - equity-related property doesn’t fall under this exemption
  • Checks voided within 180 days of issuance are not included in a streamlined audit
  • Prohibits the State Treasurer from commencing an action or proceeding respected to any duty of a holder under the Act more than four years if the holder is enrolled in the streamlined audit process

The bill became effective immediately and promises to provide positive changes to Michigan’s enforcement environment. “So far, we’ve heard positive things from the holder community. It’s more transparent, easier to administer and will return the department’s focus on reuniting property with the owner,” says Khouri.

 

During the 2016 Annual Conference, March 20 – 23, members voted Michigan as UPPO’s Member Choice Overall Excellence Award recipient. Thank you for your commitment to working with the holder community and achieving a more fair and transparent audit environment.

 


Tags:  Michigan  Michigan Treasurer Khouri  S.B. 538  unclaimed property 

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UPPO Honors Annual Award Winners

Posted By Administration, Tuesday, March 29, 2016

Each year during the Annual Conference, UPPO recognizes the hard work and dedication of association members whose efforts contributed to the success of UPPO and the unclaimed property profession throughout the past year. They deserve recognition and appreciation for their hard work, leadership, teamwork and passion.

 

Member’s Choice Awards

With the Member’s Choice Awards, UPPO recognizes specific state administrators, staff, and unclaimed property programs for their excellence. Conference attendees chose the winners from a slate of nominees, and the winners were announced during “The State Talk”. Congratulations to this year’s recipients:

  • Above & Beyond award: Walter Graham, Florida
  • Website award: Indiana
  • Overall excellence award: Michigan

 

Awards of Merit

This award is given to member organizations that have provided exceptional support to UPPO. Reed Smith, Bailey Cavalieri, McElroy, Deutsch, Mulvaney & Carpenter, and Alston & Bird received this honor for working collaboratively to represent UPPO on a pro bono basis, producing an amicus curiea brief for the Taylor v. Yee case being considered by the U.S. Supreme Court.

 

Team Player Awards

This award is presented to volunteers who serve on committees, work diligently on projects that advance the work of their committees and help pull the team together to accomplish their goals. This year’s recipients include:

  • John Waite, who initiated the recommendation of the owner representatives education and networking group to the board of directors.
  • Jennifer Borden, who assisted Uniform Law Commission and UPPO representatives better understand the securities industry as they work toward a clear, concise and fair Revised Uniform Unclaimed Property Act.
  • Adriane Counts, who led the on-demand virtual education subcommittee, turning it into an effective and efficient group that provided education to membership and the UPPO Certificate Program.  

 

Shining Star Awards

Seven UPPO members received Shining Star honors for “shining brightly to help guide the way.” They are:

  • Rick Mah, for his sustainable and forward-thinking attitude and guidance on the UPPO Scholarship Program.
  • Karen Anderson and Chris Hopkins, for their leadership and guidance on the consolidated reporting issue that UPPO and Nevada are working together on.
  • Leigh Underwood, for her leading the development and successful launch of the new certificate program.
  • John Paul (J.P.) DeCloux, for developing a system to help the Finance Committee consider project ROI and analyze the lifetime value of members based on current membership factors.
  • Chris Powers, for recommending a change to UPPO’s credit card processor, which will save the association approximately $10,000 annually.
  • Jon Hallack, for working to reform Michigan’s audit procedures.

 

President’s Award

This award, chosen by the association’s president, honors a member who has taken on a huge task or project that will help change or improve the unclaimed property profession for years to come. Kendall Houghton and Debbie Zumoff received this award for their tireless leadership representing UPPO at the ULC Drafting Committee meetings.

 

Congratulations to all of this year’s winners for their selfless dedication and commitment to their association and profession.

 

Tags:  awards  unclaimed property  UPPO Annual Conference 

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UPPO concludes successful annual conference

Posted By Administration, Thursday, March 24, 2016

More than 525 unclaimed property professionals gathered in Palm Springs, Calif., on March 20 – 23 for UPPO’s 2016 Annual Conference. The event featured UPPO initiative updates, valuable networking opportunities and more than 30 educational sessions.

 

Educational sessions

The foundation of the UPPO Annual Conference is its strong educational lineup. This year’s event included four educational tracks, providing basic, intermediate and advanced sessions along with industry-specific workshops. The session agenda included all of today’s hot topics in unclaimed property, including escheatment rules, legislative and litigation trends, audits, voluntary disclosure agreements, due diligence, policies and procedures, the Uniform Law Commission’s (ULC) work and use of the Death Master File.

 

Attendees also heard from state administrators during “The State Talk” session and got insight into the challenges faced by each of the various stakeholders in the unclaimed property process courtesy of the “Can’t We All Just Get Along” panel. 

 

State of UPPO

2015/16 UPPO President Dana Terry provided attendees with an update on the association’s recent work and ongoing initiatives. The year’s highlights include: continued membership growth, certificate program rollout, Lunch ’n Learn event introduction, ULC Uniform Unclaimed Property Act advocacy, annual conference educational track expansion, Delaware audit manual assistance, Owner Representative Committee formation, UPPO Scholarship Program growth, and association bylaw revisions.

 

“To have this many substantial projects to highlight is quite an accomplishment for a volunteer-run organization,” Terry said.

 

Attendees at the Annual Business Meeting voted to approve two recommended UPPO bylaw amendments. The first expands the association’s four regions to include Canadian provinces. The second grants the board the ability to amend the bylaws, in accordance with best practices for association governance and advice from legal counsel.

 

2016/17 Board of Directors

Terry thanked members of the 2015/16 UPPO Board of Directors for their service and recognized departing board member Debbie Zumoff for her years of leadership. She then turned the gavel over to her successor as UPPO Executive Director Toni Nuernberg installed the new board:

  • President Heela Popal
  • First Vice President Carla McGlynn
  • Second Vice President Marilyn Henry
  • Treasurer John Waite
  • Secretary Sherri Moll
  • Midwestern Vice President Troy Wangen
  • Eastern Vice President Mike Ryan
  • Southern Vice President Christopher Jensen
  • Western Vice President Scott Pettinato
  • Immediate Past President Dana Terry

Upon her installation as president, Popal outlined her priorities for the year: continued membership growth, advocacy and reform, and nurturing the new certificate program.

 

“I’m not going to only lean on the board of directors for strategic thinking, but also our members for feedback,” Popal said.

 

UPPO Scholarship

Each year at the Annual Conference, the association announces the recipient of the UPPO Scholarship. To foster an environment of continuing education, UPPO established its scholarship program to financially assist members and their children who wish to continue their education in college or vocational school programs. This year’s recipient is Charles Julius, whose mother, Cherie Julius, is senior tax manager for ULINE.

 

Attendees wishing to support the UPPO Scholarship Program participated in a 5k Walk/Run and 50/50 raffle, and donated to the program during the conference. These efforts raised over $3,500 for the Scholarship Program!

 

Sponsors and exhibitors

The UPPO Annual Conference would not be possible without the support of sponsors and exhibitors. Thank you to all of the vendors who helped make this year’s event a success.

 

Sponsors

  • Alston & Bird
  • Altus Group US Inc.
  • Boomerang Asset Recovery
  • Crowe Horwath LLP
  • Dentons US LLP
  • Financial Software Innovations Inc.
  • Georgeson Inc.
  • Keane
  • KPMG LLP
  • MarketSphere Unclaimed Property Specialists
  • Mizuno USA Inc.
  • Morris Nichols Arsht & Tunnell LLP
  • Navigant
  • Pension Benefit Information
  • PricewaterhouseCoopers LLP
  • Reed Smith LLP
  • RSM US LLP
  • Ryan
  • Tre Towers Advisory Group LLC
  • True Partners Consulting
  • Unclaimed Property Consulting & Reporting LLC

Exhibitors

  • Baker Tilly
  • Boomerang Asset Recovery
  • Chesapeake System Solutions Inc.
  • Crowe Horwath LLP
  • DuCharme, McMillen & Associates Inc.
  • Eagle Technology Management Inc.
  • Financial Software Innovations Inc.
  • Georgeson Inc.
  • Keane
  • MarketSphere Unclaimed Property Specialists
  • MIB
  • Navigant
  • New York Post
  • New York Daily News
  • Pension Benefit Information
  • Ryan
  • The Berwyn Group
  • True Partners Consulting
  • Vanacore

Mark your calendars

Thank you to attendees, speakers and members who helped plan this year’s conference, without whom it could not have been such a success. Plan to join us next year in Austin, Texas on March 19 - 22 for the 2017 UPPO Annual Conference. Planning is already underway, and it’s sure to be another great event.

Tags:  education  unclaimed property  UPPO Annual Conference 

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ULC holds its final drafting committee meeting to revise the uniform unclaimed property act

Posted By Administration, Thursday, March 10, 2016

The Uniform Law Commission (ULC) Drafting Committee to Revise the Uniform Unclaimed Property Act (drafting committee) met in Dallas, Feb. 26 – 28, to discuss outstanding issues in the Revised Uniform Unclaimed Property Act (RUUPA). 

 

Here’s an update on how the draft addresses the top five priority issues identified by members in a survey conducted in July 2013.

 

Priority 1: Due diligence timelines
Section 501
As reported in July 2015, the draft reflected a flexible due diligence timeline that would have required holders to send owner notifications no less than 60 days before filing the report. After the October 2015 drafting committee meeting, the committee reverted to prior language which requires holders to send due diligence letters “not more than 180 nor less than 60 days before filing the report”.

 

Priority 2: Record retention requirements
Section 404
Throughout the revision period, UPPO has consistently advocated for a seven year record retention requirement, and the drafting committee has held steady at 10 years. At the conclusion of the February 2016 meeting, the draft still includes a 10 year record retention requirement.

The information that holders need to retain for 10 years is:

(1) the information required to be included in the report;
(2) the date, place, and nature of the circumstances that gave rise to the property right;
(3) the amount or value of the property; and
(4) the last address of the apparent owner, if known to the holder.

Priority 3 & 4: Electronic owner contact & definition of owner contact
Section 208
Modernizing the RUUPA to acknowledge modern technology, security concerns, and communication methods was one of UPPO’s main goals in the reform process. Expanding the activities considered as eligible indications of interest, to reflect how customers interact with their financial assets and financial institutions was a priority for UPPO. 

 

Here are the activities considered as owner contact in the current draft:

 

  • Oral communication by the owner to the holder concerning the property or the account that holds the property
  • Presentment of a check or other instrument of payment of a dividend, interest payment, or other distribution, including evidence of a distribution made by electronic means with respect to an: investment account, underlying security, or interest in a business association
  • Owner directed activity, including accessing the account in which the property is held, increasing, decreasing or changing the amount held in the account or type of property held in the account
  • Making a deposit into or withdrawal from an account held at a financial organization including an automatic deposit or withdrawal previously authorized by the owner
  • Any other action by the owner which reasonably demonstrates to the holder that the owner is aware that the property exists

Priority 5: Jurisdictional reporting deadlines
Section 403
The reporting deadlines have not changed since the previous draft, and create a standard reporting deadline of November 1 and May 1 for insurance companies.


UPPO is working quickly to prepare one final written submission to the drafting committee for consideration. We’ll update the blog with a summary of the submission once it’s received by the drafting committee. If you want to hear more about how the latest RUUPA draft approaches UPPO’s priority issues, attend the 2016 Annual Conference session “Where the ULC stands on our issues” scheduled for Tuesday, March 22; 11:15 a.m. – 12:15 p.m.

 

Tags:  reform  ULC  unclaimed property  UUPA 

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